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Alcoa set to kick off latest US reporting season

On Monday 12 January Alcoa will once again kick off the US reporting season as it posts its fourth-quarter figures. 

Alcoa logo
Source: Bloomberg

The company’s adjusted earnings per share is expected to drop from 31 cents to 25.6 cents. Sales are also expected to come in weaker down from the last quarter’s $6.239 billion, to $5.991 billion. Contrary to these though the company’s pre-tax profits are called higher at $527.5 million, better than the preceding quarter’s $330 million.

Institutional opinion on the company still remains resilient. Of the 21 companies rating Alcoa, there are nine strong buys, four buys, seven holds and only one strong sell. The average 12-month price target for the company is $18.79, a substantial premium to the current share price of $15.25.

Last year saw shares in Alcoa increase by over 40% as the company continued to alter its business model. The lightweight metals and aluminum manufacturer has benefited from a car market showing real signs of resilience, and an aeronautical sector that is more optimistic than it has been for many years with oil prices continuing to fall. These two solid benefits should help the ongoing profitability of the company.

The bigger, less quantifiable benefit in 2015 could well come from Asia, specifically China. Last year saw China embark on red tape cutting and improving the environment for business to prosper in the region. The year 2015 has seen the government announce that it will fast track $1 trillion worth of government infrastructure spending which could boost metals and commodity companies.

With the shares trading around the $15 level and the stock looking on the cusp of being oversold, this could well be the buying opportunity that investors have been looking for. A word of caution; the $18 level has been a top the shares have been unable to break dating back to 2008.  

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